Reality Bytes - April 2016

Maryland Fiduciary Access to Digital Assets Act (“MFADAA”)

In the Notes From the Chair column in this issue of the Newsletter, Section Chair Charles Abell reports on legislation passed by the Maryland General Assembly during its session just concluded. I call your attention to MFADAA, which will finally provide clarity about control of a person’s digital assets if he or she is disabled or deceased. More detailed information on MFADAA was provided in the Fall 2015 Newsletter in an article by Anne Coventry entitled “Update on Fiduciary Access to Digital Assets.” A future issue of the Newsletter will discuss the final legislation (unless vetoed by the Governor) in greater detail. Please read the provisions of the bill (HB507/SB239) and consider how they should be incorporated in your estate planning documents.

Dance to the Music - Part II

As I explored in the Fall 2015 Newsletter, technological evolution in the way we listen to music has given us (as consumers) enormous choice and considerable flexibility in the way we listen to and enjoy a wide spectrum of music through a variety of devices. (While this discussion is focused on music, consider how technology has done the same for other forms of intellectual property --- books, newspapers, magazines, journals, photographs, encyclopedias, etc. --- work created by others that we can access much more easily than ever before.)

This article presents some thoughts about how this technological advancement for consumers has affected songwriters and musicians (the creators of the intellectual property).

When the music is free or nearly free and easy to access, it is easy to forget that those who created the music deserve to be compensated for that creativity and effort. There are still costs for the consumers – for example, paying for individual songs or albums on iTunes. As compact disc sales fall and streaming music revenues rise, however, many artists are not seeing equitable compensation. New, emerging artists and artists who are wonderfully creative, but not commercial superstars, lack strong bargaining power to demand better compensation. These artists often need the exposure that these streaming services provide, but see little return for the use of their music.

Let’s look at each end of this new paradigm. On one side, listeners (subscribers, consumers, or customers) may be paying for premium services through Spotify and Pandora. For example, I pay a monthly fee to Spotify. Pandora calls itself Internet Radio (with commercial spots). While not strictly “free”, the low monthly fee or a few commercial ads make these services very attractive for the listener, with access to large libraries of music. (Through Apple’s iTunes one can download for free and listen to a huge selection of podcasts from broadcast radio such as NPR All Songs Considered and Tiny Desk Concert, The New Yorker’s Fiction podcast, This American Life, The Writer’s Almanac, and On Being.)

On the other side of this equation, are the artists who create music getting fair compensation for their efforts when that music is now widely distributed digitally for “free” or for very low user fees? Is streaming digital music the answer to the problem discussed in Part 1 of this piece, i.e. buying your favorite music over and over again in different formats as technology changes?

Perhaps not, or not yet. For a consumer, the answer may be closer to “yes”. Digital music (or books, or movies, etc.) seems to offer great convenience, portability, and some promise of being around longer. Digital technology may change, but if digital technology changes, the consumer listening to a digital stream online may just need to update the app, not replace the device through which they listen. Streaming digital music is likely to be around for a while.

Consumers may be concerned about the sound quality of digital music. Since music was digitized on compact discs, complaints about quality persist. Some artists have gone back to pressing high quality vinyl records for fans who want better sound quality. Admittedly, sound quality of streaming music can be limited by the device that you use to play the music. The speakers on your iPhone are never going to provide sound quality equivalent to a good sound system. A good pair of headphones might be a wise investment.

Artists such as The Beatles, The Rolling Stones, Led Zeppelin, etc. may be able to strike lucrative deals for their music and control how it is presented. These artists can negotiate the deals they want because there is high demand for their music. These artists also can decide which providers will get their music.

When the artist Prince removed his music from Spotify and Rdio, but left it on other services like Google Play, Tidal and Deezer, it was noted online that:

“Besides his impressive string of hit songs, Prince has always expressed his strong advocacy for artist’s rights, whether through his music, words, or actions.”

The sad news of Prince’s death has brought attention back to this advocacy. No doubt many, many around the world will remember Prince through his music. A quick trip to Spotify, however, still finds the statement: “Prince’s publisher has asked all streaming services to remove his catalog. We have cooperated with the request, and hope to bring his music back as soon as possible.” To find Prince’s music you have to go to Tidal. Except for a 30-day free trial, Tidal is a paid subscription-only service promising high quality sound.

Another report on the difficulty that fans were having finding Prince’s music online went further to explain that Prince’s interest in protecting his rights to his music led him a few years ago to the extraordinary step of buying back the rights to his own music from his publisher Warner Brothers. After this purchase, he alone controlled its distribution. This highlights another major problem for artists, namely, that as they become successful and get recording contracts, they actually bargain away rights to their own music.

There are very, very good local artists (some of my favorites: Arty Hill and The Long Gone Daddys; Caleb Stine; Victoria Vox; Ellen Cherry; UltraFaux) who have been recognized and actually play outside the area, but have a hard time making any money through online services. Often, they only post selected material online to give newcomers a sampling of what they do. Economically, they cannot afford to put all their music out there because they make next to nothing doing so. They might not even be able to afford “pie for breakfast.”

Even established artists must go on tour to make significant money. Bob Dylan’s “never-ending tour” has had him on the road almost continuously for years. Acts like The Rolling Stones seem to return to the road every few years, as their output of new music slows and the new recordings draw less demand. Fans want to hear the hits and are willing to pay.

Established artists also are re-packaging and selling their old music. As I revised this article recently, Bruce Springsteen and the E Street Band were preparing to perform in the Baltimore Arena. The current tour commemorates the 40th anniversary of the release of The River, a double album played in its entirety at each show. One source told me of a conversation with the manager of the Arena, who said Bruce gets 95% of the gate (the list price of the tickets sold). Springsteen shows still sell out (and make money for scalpers too!).

Concurrent with the tour, Bruce released an extended edition of The River, titled “The Tie That Binds: The River Collection,” containing 52 songs and 3 hours and 17 minutes of music. (It takes Bruce and the E Street Band about two hours plus to play the original album live.) The Tie That Binds spreads out over four compact disks and contains previously released alternate singles and previously unreleased outtakes from the original recording sessions. Even though this recording is available on streaming services like Spotify, this is another way Bruce makes money --- selling fans enhanced or augmented versions of his past.

Bruce is not alone or the first to do this. You may be old enough to remember when artists had to battle with “bootleg” recordings of their work, unauthorized copies from recording sessions or concert performances. The Grateful Dead actually encourage their fans to swap recordings of live concerts and maintained a deep archive of their own that the band has released from time to time.
For years, bootlegs of unreleased recordings of Bob Dylan and The Band, known as the “Basement Tapes,” circulated among fans, to the point where they became legendary – a “holy grail” of bootlegs. Eventually, Dylan turned the concept around and has been releasing his own “Bootleg” collections of unreleased alternate versions his recorded catalog of songs as well as material never released before.
I listened recently to a compact disc of Dylan’s “The Cutting Edge 1965-1966: Bootleg Series Vol. 12” on my commute to and from work. A couple of years ago, Dylan released an elaborate box set of the entire “Basement Tapes,” complete with a thick booklet detailing the recordings. (Dylan has always maintained his own deep archive of written and recorded material. It was announced recently that he is transferring this massive archive to the George Kaiser Family Foundation and the University of Tulsa for a reported $15 to $20 million. It will reside there in the company of “a rare copy of the Declaration of Independence, a cache of Native American art and the papers of Woody Guthrie.”)

Other established artists are starting to react as Prince did. Some, like Taylor Swift, have enough popularity to follow Prince’s example and hold their music off Spotify and fight for a better deal. Some of these artists want not only a fair pay scale, but want to restore sound quality to digital music, a primary goal of Tidal, which was started by artists.

Finally, the question comes back to who owns the music? If you use Spotify, Pandora, Tidal, etc., you are renting the music.

You are subscribed to an enormous musical candy store, you can search for all kinds of goodies, but if you stop paying, the door is shut and there is no more music. Your subscription fee replaces the commercials on radio and digital streams that use them.
Steve Jobs is often mentioned as having ushered in the new era in the digital distribution via the Internet music when he launched iTunes. 1/ Amazon followed as part of an even larger new era in the distribution of music and other intellectual property. Jobs also is said to have held an “ownership” concept of the music:

Steve Jobs’ company launched iTunes as a product to be run on its computer. Later, with the launch of the iPod, more features would be added, with a bigger catalogue and more products. According to Martínez Sanmartí, “iTunes created a format that was new and old at the same time: new because it offered the possibility of buying individual songs at a dollar each and eliminated the traditional physical medium, the CD or vinyl record”. But also old because “it kept a price similar to the CDs and also perpetuated the idea of buying and owning music files, in other words, music was still something to be possessed and stored, even if it was now on the computer”.

What has happened since clearly has been an abandonment of the “ownership” model. Streaming services with monthly subscriptions are the norm. You still can buy music files, but that is not the mainstream market. Even before iTunes and Spotify and Pandora, music lovers with record and CD collections used their computers to copy the music into digital format and download it onto devices like iPods. Having purchased that music once (or borrowed it from a friendly source), we may have felt entitled to duplicate it digitally. Legally, that is not correct. Distribution of those digital “bootleg” copies is another step in the wrong direction. Until the iPod fails or is pried from a cold dead hand, however, that music will remain and will be heard again.

In Part I, there was a list of devices used to play recorded music. The physical form in which the music came dictated a corresponding need for a device to play the music. If you still have records, you still need a phonograph. If you still have cassette tapes, you still need a cassette player.
Digital music frees us from that paradigm. We can play digital music through many different devices in many different settings, but that freedom may have costs, real and hidden. We may think of it as “our” music, but it really is intellectual property created by someone else – the artist. We may think that we are paying for the music, but really we may only be paying for access to the music. Think about all this the next time “your” play music.

RCY

1 iTunes, a key player in the paradigm shift in music consumption, 14/01/2016 Germán Sierra; http://www.uoc.edu/portal/en/uoc-news/actualitat/2016/215-itunes-key-shift.html

Piracy, Privacy and Money, Money, Money - Part III

This is the third and final part of a series.

Money. Money, Money

Deep Throat: Follow the money.
Bob Woodward : What do you mean? Where?
Deep Throat : Oh, I can't tell you that.
Bob Woodward : But you could tell me that.
Deep Throat : No, I have to do this my way. You tell me what you know, and I'll confirm. I'll keep you in the right direction if I can, but that's all. Just... follow the money. 

All the President's Men

Social networking, Internet businesses and technology are big business today.

Facebook has $4 Billion in cash and has filed papers to go public with speculation that its initial public offering price may put the value of the company at $100 Billion.  Facebook recently made an offer to acquire Instagram, photo sharing social networking site, for a reported $1 Billion.

"I'm excited to share the news that we've agreed to acquire Instagram and that their talented team will be joining Facebook."  Mark Zuckerberg

Apple, once counted out as an interesting piece of technological history, has seen its market capitalization eclipse the once mighty Microsoft and oil behemoth Exxon.  It is the biggest company on the planet.  If you go to the link at the beginning of this paragraph, the list of market capitalization includes Microsoft (now No. 4), followed by IBM (No. 5).  Google is at No. 11, just ahead of Warren Buffet's Berkshire-Hathaway.  Remember when we thought IBM was relic of the past?  There may be hope still for Yahoo!

Money makes the world go round
The world go round, the world go round
Money makes the world go round
It makes the world go round.

Money, Money, Money - Cabaret

This surely could be the sign of another technology bubble in the stock market, but it also is a sign of how important technology has become to our economy as well as the world economy.

Let's reflect a bit more.  In a prior column, I wrote about a new the new music service Spotify.  Spotify did not start in the U.S.  It started in Europe and became very popular there before coming to America.  Spotify had to negotiate first with the Neolithic music industry in this country, which seems unable to grasp the potential and power of digital distribution of music and unable to figure out how to fashion a new business model to capture that potential and power.  The U.S. music industry (and its global counterparts) seem to want the money, but only if they can collect it in the old fashion way -- one record, cassette tape, compact disk, song (??) at a time.  The music (and film) industry seems to be spending more time and money fixated on digital piracy.  It has failed again and again to realize that times have changed.  To paraphrase Satchel Paige, looking backward is likely to reveal that someone is catching up with you.

Most technological successes  did not start out as the product of trickle-down capitalism.  Whether you were named Hewlett or Packard, Steve Jobs or Steve Wozniak, Zuckerberg, or Gates, or Paige or Brin, their first was an idea, then there was a lot of  scrambling and tinkering and writing code, some fortuitous opportunities seen and taken, and, finally, in the modern era, a form of trickle-down capitalism:  venture capital firms.  NPR recently did an interesting series of reports on the rise of Silicon Valley, including a timeline and a profile of the early venture capitalists.

Venture capitalists started out driving around Silicon Valley almost literally trying to give money away (in return for a piece of the action).  Now, the investment side of the technology business is more like a tech version of American Idol, with bright innovators auditioning their start-ups to see if they can get funding from the venture capitalists.

So what are the venture capitalists looking for?  What, for that matter, is Mark Zuckerberg looking for when Facebook acquires Instagram for $1 Billion?  Look in the mirror.  Money is chasing money, specifically the money that we ("we" being the great huddled masses, the 99%) have.  We are were the real money is, and all of this consumer-based or social networking technology, in one way or another, is looking for us as users so that it can get to our dollars.  And in order to get to our dollars, these businesses need to know a lot about us; they need to create profiles of our likes, dislikes, interests, questions, searches.  From this information , these businesses can create a picture of us, so that, either directly or indirectly, someone can sell us something.

There are easy illustrations that I have used before.  Facebook posts ads on our pages that result from knowing what we "like" and, thus, are targeted to sell us something we are predisposed to like or want.  Facebook is being paid to broker this kind of advertising.  Amazon recommends products to us based on our shopping history, knowing that we are predisposed toward these items based on what we bought in the past.

Here is a more interesting example reported by Marketplace Tech in late April.  When we think of Walmart, the most immediate imagine may be of a mom & pop store gone wild.  The old  5 and 10 cent stores of another era on steroids.  (Interestingly, in typing this, I noticed that the modern computer keyboard no longer as key for the cent sign; you have to select it as a symbol and Google's Blogger does not seem to have this function.)

Well, Walmart also sells things online.  Walmart noticed an interest fact about its in-store shoppers.  Many of them pay in cash.  (Many Walmart shoppers are a true part of the 99%, part of a cash based economy, which the Walmart spokesperson described as:

unbanked or underbanked, “meaning they either don't have access to a bank or they have limited banking services or they don't have credit."

Walmart also figured that many of these customers would like the convenience of shopping online but for one small, but important problem:  you cannot stuff cash into your computer to pay for your purchases.  So, Walmart is now letting people order online, then come into a Walmart store and pay in cash and have the items purchased online shipped to them.  This, of course, also gets the customer into the store and may result in them wander around and spending more money.  (Presumably, as the customer has to go to the store to pay, Walmart has enough stuff available online that the customer cannot simply buy in-store or that the customer may purchase online more readily than they would want to wander around the store looking for.)

Let's go a bit further.  Let's examine the concept of "free."  If you have a iPhone or Android smartphone, an iPod Touch, or a iPad or other tablet computer, you probably have apps (short of applications), those tiny little titles which take you to all kind of stuff.   iTunes tells me that I have 155 apps on my iPhone, iPod Touch and one that I purchased for an iPad that my partner loaned to me.  Some of these cost money, like the Brian Eno ambient music apps, Bloom and Trope, or the Notetaker HD app that I purchased for my partner's iPad.

Many apps are "free," which encourages you to grab a big handful of them each time go to the app store.  It seems like there is an app for nearly everything, so why not try these free apps and see how they work.  After all, they are "free."  Not exactly.

Most free apps do one or both of the following:  (1) try to sell you upgraded versions that cost money or other related apps and/or (2) mine your activities for data on you and your usage of the app.  This still may seem like a sweet deal, because you can ignore the ads and who really cares if you just played "exhalent" in Words with Friends for a ton of points (a word which the spell checking in Google Blogger does not recognize, but Words with Friends accepts, much to the delight of my wife, who played it in a game with me.)

Stop playing Words with Friends for a minute and think a bit more.  Like many newer apps, Words with Friends is designed as social interaction with others and pretty much requires that you connect through social networking sites like Facebook so that you can connect with your friends who also have the app.  (I admit that I took the easy way of connecting through Facebook, which allows me the joy of regularly being beaten by my youngest daughter.  There may be a way to connect using Facebook or other social networks, but is not likely to be as easy to use.)  This tie-in fosters more users for Words with Friends and for Facebook.

The dark side is in the details when you decide to connect to Facebook.  In a brief notice before you connect, you are told that in making the connection, you are allowing the app and Facebook to access your personal information and usage records.  You want to play the game with your friends, so you click and move on thinking that one day you will have to go review those privacy setting in Facebook.

There’s a saying that’s used a lot in the online world: if you’re not paying anything, you’re not the customer, you’re the product.

Where is all this going?  Go over to Marketplace Tech Report and listen to/look at this linked report:  Send a $5 gift card to your friend free? What’s the catch?  It tells the story of a new app called "Wrapp," which enables you to send "free" gift cards to your friends.  What a deal!  "Free" right?  Not really.  Wrapp requires that you allow access to your data on Facebook.  The social networking connection here is essential.  Merchants are not giving away free gift cards; they are buying customers much more cheaply and effectively than an old fashion sales ad in the newspaper.  As the Marketplace report states:

So instead of the newspaper bringing the product to the consumer, you bring the product to your friend.  “We already know that ties between people in social networks can be power channel for marketing a product or brand,” says Alessandro Acquisti, co-director of Carnegie Mellon University's Center for Behavioral Decision Research. “This new application takes things one step further, effectively enlisting your friends as their own marketing agents.”

So you are really selling yourself and your friends in return for those "free" gift cards.  Are you at the crossroads about to sell your soul?  May be not, but before you agree to the "access my personal information" deal the next time, thing a bit more about what that means and what your are sharing.  Perhaps all of that personal information results in a small window to your soul.

The best things in life are free
But you can give it to the birds and bees
I need mon-ey
(That's what I want)
That's what I want, hey!
(That's what I want)
I need money, that's what I want
That's what I want

source: http://www.lyricsondemand.com/soundtracks/m/madmoneylyrics/moneythatswhatiwantlyrics.html

Where Are We Going? (Part I): The PC is Dead! (Or Is It?)

All Things Digital ("ATD") is a rather good website for commentary on technology and the business of technology.  It features two Wall Street Journal standouts, Walt Mossberg, who authors the WSJ Personal Technology column/blog, and Kara Swisher, who does the same for BoomTown. A few years back, ATD decided to host a conference about, well ... all things digital.  In early June, this year's conference, D8 rolled around and the opening night featured an expansive Mossberg/Swisher interview of a modern day Lazarus of sorts, Steve Jobs.

In case you have been out of touch, Steve Jobs is legend.  Having co-founded Apple somewhere around the dawn of the personal computer age, Jobs helped steer the company to be one of the only true alternatives to the hegemony of Bill Gates' Microsoft. He left Apple for a while, and then returned when Apple seemed to be foundering.  During this return engagement, Jobs has reshaped Apple and the world of computing yet again, revitalizing Apple's core line of computers, both desktops and laptops, and revolutionizing a somewhat definition-less space loosely called personal computing devices.  A few years back, personal computing devices amounted to not much more than a few smart-phones that were struggling to become smarter and more integrated through wireless connection to the Internet.

Jobs did a flanking maneuver with a personal music player called the iPod.  He built an online store called iTunes and started selling music to fill iPods.  The industry took this as a noble little gesture befitting of Apple's technology wizardry:  a sleek little device to entertain us, but hardly a big threat.  Still, people seemed to like this idea and started buying iPods, filling them with their own music and downloading songs from iTunes.  Soon other things came along, like a new thing called a "podcast" and videos.  Othe companies brought out generic MP3 players.  Microsoft thought that it could compete in this market and launched a player of its own, Zune.

The first iPods were relatively primitive.  (I know, because I still have a second generation Mini, which but for the lack of any battery life, still works.)  By the time that Zune arrived, however, Apple had newer versions of the iPod that were better and fancier and started to do more things, like play video that could be downloaded from iTunes.  The first generation Zune never had a chance. Nowadays, I am told that there is an outstanding new generation Zune that outperforms the iPod in a number of areas.  Unfortunately, not many people care.  Apple's iPod dominates.

This pattern bears watching, because Apple repeats it.  Jobs admits that Apple needed to make much more strategic choices.  Apple is a hardware company that does particularly innovative things with the software it develops for that hardware.  Its computers remain a much smaller part to the market compared to the legion of computers that run Microsoft's Windows operating system.  What Apple does is look for openings in the market where it can excel and innovate.  It has succeeded and, in doing so, has moved the market toward Apple.

Apple brought out the iPhone to take on other smart-phones that were having trouble figuring out how to integrate their functionally with the Internet.  Several generations of iPhones down the line, Apple dominates the creative side of this space, with the rest of the industry still trying to keep up.  It has made this market interesting enough to draw Google into the operating system competition.  Microsoft recently released a new version of its mobile phone operating system, again trying to catch up in this competition.

Apple also brought out an iPod called the "Touch" or "iTouch" that connected to the Internet via WiFi.  Built with many features in common with the iPhone, the iTouch started to capture the attention of younger users who wanted mobile access to the Internet for emailing and social networking, but did not necessarily want to get an iPhone (just yet).

Finally, Jobs unveiled the iPad this year.  The iPad is a tablet computer that appears to be redefining the non-desktop computer sector.  Of course, we still have laptop computers, which thanks to Apple's leadership again, are getting small and lighter, but are capable of providing full-function computing on a par with a desktop computer.  We also have "netbooks", devices that are smaller than a laptop, which connect to the Internet and provide some computing capability, but lack the memory and other features of laptops.  Finally, we have e-readers for electronic books, such as Kindle, Nook, etc.

Building off the iPod, the iPad is a uniquely different computing device.  Through it, Apple definitely has designs on furthering its emergence as a media company.   Apple is making a play for the market held by e-readers like the Kindle.  The iPad also is designed to build on the iTouch and provide more utility as an access point to the web.  The competition has followed Apple's lead by announcing its own tablet computers.

Through all this, Microsoft largely has been missing in action.  It failed to mount any meaningful competition to the iPod.  It has meandered around in the cell-phone operating systems wars without much distinction.  Google's Droid operating system is a more formidable challenge to the iPhone.

Apple recently surpassed Microsoft in market capitalization.  And, Jobs dodged the grim reaper in his bout with liver disease.  So, getting him to sit down and talk on opening night of D8 was huge.

There are significant problems in the forgoing success story, some of which are attributable to Jobs' insistence on doing things the "right" way (his way?).  First, the iPhone has only been available on the ATT network, which, for all its technical synergy with the iPhone, is universally viewed as a lousy network.  Apple will now be selling a lot more iPhones, as the rumors that the iPhone will be available on Verizon next year appear to be confirmed.

Second, and more problematic, Jobs could not get satisfaction out of Adobe over weaknesses in its Flash Player, so neither the iTouch, iPhone or the iPad run Flash Player.  As Flash Player is integral to the operation of many website audio/visual clips, particularly on Google's YouTube, Apple has wonderful devices to reach the Internet, but spotty content once you get there.  No word at this writing on how this standoff will end, but Jobs is asked about it in the interview.

Finally, the newest iPhone model, iPhone4 received bruising criticism for reception problems related to the device itself (not ATT's network).  The New York Times reported that Consumer Reports would not recommending the iPhone4 because of a flaw with its antenna.  The furor dragged down Apple's stock price for a while, but seem to have blown over.

With apologies for the long lead above if you already knew all this stuff, what I want to discuss are comments by Jobs at D8 on the future of the computer and a response from Microsoft CEO Steve Ballmer on the last morning of D8.  Let's clarify terminology first.  The term "PC"seems to be a bit of a sore spot between Jobs and Ballmer.  My take on these interviews is that Jobs uses the term to refer to full size desktop computers generally and to some extent fully functional laptops (with hard drive memory and CD/DVD capabilities).  At one point he says as much to Walt Mossberg, describing himself and Walt "as people from the PC world" and saying that "PCs have taken people like us a long way".  Ballmer seems to respond as if he interpreted the remarks to apply strictly "PCs", i.e. -- computers running Microsoft Windows (or the next OS from Microsoft, which may not be called Windows anything).

Remember that Apple is a hardware manufacturer.  Microsoft is a software company.  Except for the Xbox game system, Microsoft has not really succeeded in developing any significant hardware business; it makes its money on operating systems that are installed in the vast majority of full scale desktop and laptop computers.  So, Ballmer may simply be defensive about Microsoft losing market share, but he comes off sounding like the PC half of those famous Apple Mac-PC ads.  (Ballmer is certainly defensive about a lot of things these days;  listen to his comments about Google and Android and Chrome.  Here is a mash-up putting the Jobs and Ballmer comments side by side in a point-counter point debate.)

Jobs essentially made an analogy that the full scale desktop computer is like a truck:  it has great utility and will continue to have great utility to accomplish the jobs for which we need a full scale computer.  (And, like trucks, there will be some people "driving" a full scale computer when they do not really need one.)  Jobs thinks, however, that we have already entered an era where typical computing needs can be handled by small devices, that there is a paradigm shift under way.

Ballmer made some jokes about "Mac trucks" and offered some backward-looking platitudes about Windows PCs being "mass popularizers", but ultimately conceded that there will be smaller devices that serve different functions.  Jobs, of course, does not say that the iPad is going make the PC obsolete (at least not any time soon), but that new order is coming.

Microsoft is really besieged on several sides by the forces of change.  Google (which Ballmer called a "behemoth", as if Microsoft is somehow the new David to Google's Goliath) is focused on more and more functionally occurring online, with the need for resident operating systems and programs in our personal computers becoming less important.

My take on this is that Ballmer's smugness hides an unease about Microsoft's ability to adapt.  With the desktop computers beginning to wane and Microsoft missing in action on most other fronts, Microsoft faces the prospect of watching is its operating system business for PCs slowly (or rapidly) disappear.

One can only hope the Ballmer and others at Microsoft can read their own corporate history and understand its implication for the future.  After all, what Jobs said embodies and extends the vision that Bill Gates had many years ago when he foresaw the personal computer becoming a part of every day life, empowering people and moving us out of the era of mainframe computer.


Ballmer seems to lack a vision of the future.  His comments are reminiscent of a backward looking discussion last year by Mircosoft's chief strategist, Craig Mundie.  Jobs is not clairvoyant.  He is just a keen observer of what has happened with computer technology and where the future lies.  Historically, as Gates foresaw, computers and computing devices have gotten smaller, more affordable, and have empowered more and more people and have rapidly broken down definitional lines in the process.  The Internet has driven this process even faster by allowing people to do many things online that they used to need a desktop (or mainframe computer) to do.

Interestingly, in September, IBM CEO Sam Palmisano declared the PC business dead in an interview with The Wall Street Journal's Viewpoints.  Remember that IBM invented the PC.  IBM sold its PC business several years ago for a reasonable price. Palmisano went so far as to say that he "could not give [the PC business] away today."

I think that there is little doubt that we will see a growing use of smaller computing "devices", more use of the Internet in place of the desktop and more freedom and power to use this technology in the hands of more and more people.  The desktop will still be around.  Netbooks may or may not survive the advances represented by the iPad.  Our cellphones will get smarter.  We yet may see widespread availability of connectivity through WiFi.  (Google is certainly pushing in this direction.  The major wireless carriers better take notice because their monopolistic pricing structure will be vulnerable to competition for access that is more fairly and properly priced.)  Microsoft's challenge seems to be finding its place in this future.  Jobs is at the crest of the next hill telling us what he sees beyond. Ballmer is still huffing and puffing his way up to get a peak.

Look at the people around you, at work, at home, at leisure.  Increasingly, people are doing many things without a desktop computer (PC or Mac).  Laptops have become more common place, even within offices.  Whether they are using a netbook, a iPhone, a Droid phone, an iPad, an iPod Touch, other similar devices, people are connecting  and computing through the Internet from home or office or places in between.  The Wall Street Journal ran a story recently on the surging sales of portable communication devices, including the iPad, at big box retailer Best Buys.  The article also noted that the iPad was drawing customers away from laptops.
Whether at work, on vacation or at the gym, people are reading email, listening to music, going to websites, linking to their workplace network, making dinner reservations, checking out local movie listings.  I typed part of this column on a laptop at an ACTEC meeting in Pennsylvania.  It is fairly clear that a new paradigm has emerged.  The next part of this series of columns will discuss some of the reasons why the desktop computer and even the traditional laptop computer, while still important, are increasingly secondary in the modern world.


(Disclosure:  The author holds stock in Microsoft, Apple and Google.)